Transfer of right to use goods requires effective control; bus hire for employee transport was not taxable.

Hire charges for supplying buses to companies for employee transport were not taxable as a transfer of the right to use goods. Although the companies fixed routes and timings, the buses, drivers, fuel, maintenance, insurance, permits and operational risks remained with the owner, and the companies did not obtain legal possession or effective exclusionary control. Applying the settled test that a taxable transfer requires more than mere permission to use and must include transfer of control and the legal right of use, the arrangement was treated as a mileage-based transport service rather than a transfer of goods. The levy was therefore unsustainable.

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Issues: Whether the hire charges received for supplying buses to companies for transport of employees amounted to tax on transfer of right to use goods under section 3F of the U.P. Trade Tax Act, 1948.

Analysis: The contract terms showed that the buses, drivers, spare tyres, tools, diesel, maintenance, insurance, taxes and permits remained under the owner's responsibility. The companies fixed routes and timings for employee transport, but the vehicles continued to be operated by the owner's staff and the owner bore the running risks and liabilities. The arrangement was on mileage and actual use basis, and the companies did not obtain complete exclusionary control or legal possession of the buses. Applying the settled test that a transfer of the right to use goods requires more than a mere permission to use and must involve effective transfer of control and legal right of use, the transaction did not satisfy the statutory requirement.

Conclusion: The receipt was not taxable under section 3F as a transfer of the right to use goods, and the levy was unsustainable.

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